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Bath Supplies Corp.s capital structure is 60% debt and 40% equity. The company is planning to build a plant to manufacture a new type of
Bath Supplies Corp.s capital structure is 60% debt and 40% equity. The company is planning to build a plant to manufacture a new type of organic toothpaste called Krud. Brightee Inc. produces only organic toothpaste. Brightee's beta is 1.2 and Brightees capital structure is 30% debt and 70% equity. The risk free-rate is 3% and the market premium is 7%. Bath Supplies after-tax cost of debt is 7%. What discount hurdle rate should Bath Supplies apply to the new plant? Use the proxy firm beta method.
Proxy WACC =
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